Pursuit Dynamics Reports Loss Of GBP3.3 Million For H1 Fiscal 2008/09

Pursuit Dynamics plc (Pursuit Dynamics) has reported revenue of GBP7,286 for the first half of fiscal 2008/09, compared with the revenue of GBP225,005 in the year-ago period. It also reported a loss of GBP3.3 million, or 5.54 pence per share, for the first half of fiscal 2008/09, compared with the loss of GBP3.8 million, or 6.48 pence per share, in the year-ago period.

Financial highlights

Turnover (including discontinued operations) decreased to GBP0.7 million (2008 GBP1.8 million) following the move to a licensing operation for food and brewing.

Loss for period (including discontinued operations) decreased to GBP3.3 million (2008 GBP3.8 million)

Closing cash balance GBP4.5 million (2008 GBP1.6 million).

Significant cost reduction realising savings of GBP0.5m in this half compared to H108.

Commenting on the results, Andrew Quinn, chairman of Pursuit Dynamics Plc said: “The first half of 2009 has been difficult, but we have seen steady progress in the areas of fire suppression and decontamination. Revenues have started to flow in both areas since the end of the financial period and commercial visibility is increasing. Progress in the bio-ethanol market has been slower than we had hoped with the implementation of the ERT at IBEC experiencing delays resulting from the process and integration challenges of taking new technology into an industrial environment, rather than any shortcomings in the core PDX technology. The Board is hopeful that these delays will be resolved quickly.

Our response to the difficult economic environment has been decisive and effective with over GBP0.5m of costs removed from the business during the period. This action, combined with the commercial progress that has been made across all our business in the half, ensures that we are well placed to maximise shareholder value in second half of 2009 and beyond.”

Financial Results

Including discontinued operations, turnover decreased to GBP0.7 million following the decision to run down and ultimately close the fabrication activities at Pursuit Processing Equipment (PPE) at Weybridge (announced at the AGM in March 2009) and move to a licensing operation for food and brewing. The closure of PPE will be concluded in early July 2009. The decision to exit fabrication activities, along with cost cutting measures realised a saving of GBP0.5 million in the period compared to the first half of 2008.

Net cash outflow for the period, including discontinued operations, was GBP3.0 million compared with GBP3.4 million for the six months ended 31 March 2008.

Operational Review

The company’s primary focus during the period has been on the commercialisation of technology in the ethanol industry and in the civilian and military decontamination and disinfection sectors. The company’s R&D programmes continue both to advance existing core applications and to throw up new and exciting applications for the PDX technology, the most advanced of which are in the field of renewable fuels.

Ethanol

Whilst the US ethanol industry has been under extreme economic pressure during the past year or so, there are signs that it has passed its low point. Rising gasoline prices, production utilisation at around 25% below capacity and continuing political support to reduce reliance on imported liquid fuels in the US are all helping maintain the industry at close to break-even. In this context, the benefits of the ERT could be of major significance to the entire industry: a typical 50 million gallon per year ethanol plant would see a gross benefit of $8.7million per annum based on 10% yield uplift from the PDX ERT – a continuous performance enhancement the company believes to be well within the capabilities of the ERT system.

The company has made commercial and technical advances with its ethanol technology during, and subsequent to, the period under review. Of particular importance were the results generated during the commercial validation trials at Pacific Ethanol’s Boardman, Oregon, facility. During several weeks of running, the PDX ERT produced third-party validated increases in ethanol yield that averaged 7.1% over 40 fermentor runs, thus demonstrating the potential for the commercial future of the ERT system. A number of individual results in the reported average were in excess of 10%, a figure approaching those achieved by us in both internal and external trials. The company has recently been asked by Pacific Ethanol to discuss the possibility of returning an ERT system to Boardman and recommencing production at the plant.

In March, 2009 the company’s commenced operations at the Iroquois Bioenergy company’s 45 million gallons per year ethanol facility in Indiana. This plant is of a different design to Boardman and, unfortunately, the company’s ran into a number of issues that caused delays during early operations.

Most of the problems centred on the control system of the ERT and the company is currently addressing this and other issues relating to optimal running of the system while the company works towards a re-start date at the plant. In addition, the company has a number of alternative venues becoming available to us and, as it gain visibility of the timeframes associated with these opportunities, the company will report back to its shareholders.

Whilst the company has seen some delays in the implementation of the ERT at IBEC, they have been due to the process and integration challenges of taking a new piece of technology into an industrial environment, rather than any shortcomings in the core PDX technology. While these delays are frustrating, they are not unusual in the implementation of any new technology.